Guidance

Tax-free savings newsletter 24 — October 2026

Published 29 October 2026

Lifetime ISA withdrawal charge reduced for first-home purchases above the property price cap

From 29 October 2026, as announced at Budget 2026, a reduced Lifetime ISA withdrawal charge will apply where a first-time buyer withdraws their Lifetime ISA savings to purchase a property costing more than £450,000.

For these purchases, ISA managers must apply a withdrawal charge of 20%, rather than the usual 25%, to the amount withdrawn. The £450,000 property price cap itself remains unchanged. The 25% charge will continue to apply to other unauthorised withdrawals, known as unlisted withdrawals.

What customers, conveyancers and ISA managers need to do

Lifetime ISA holders must continue to use the existing house-purchase withdrawal process through their conveyancer. They must complete an investor declaration form and the conveyancer must complete a conveyancer declaration form confirming the property value.

Once the relevant declarations have been received, the ISA manager must:

• deduct the reduced 20% withdrawal charge
• release the Lifetime ISA funds to the conveyancer
• retain the charge until HMRC’s systems have been redesigned to collect it

We expect system redesign to be completed in 2027 and will notify Lifetime ISA managers once this is complete.

The reduced charge applies to eligible withdrawals made on or after 29 October 2026. It does not apply retrospectively. A previous unlisted withdrawal cannot be reinstated into the Lifetime ISA.

The guidance for Lifetime ISA investors and ISA managers is being updated to reflect this change. It is supported by the Individual Savings Account (Amendment) (No. 3) Regulations 2026 and an Explanatory Memorandum.

Find out more about first time residential purchases with a Lifetime ISA and the Lifetime ISA withdrawal charge.

Next steps for Help to Save

In June 2026, the government announced that the reformed Help to Save scheme would be delivered through a multi-provider model. It has now been confirmed at Budget 2026 that the reformed scheme will be introduced in Spring 2028.

The multi-provider model will mean Help to Save accounts can be offered by a wider range of financial institutions, including banks, building societies and credit unions. This will help make the scheme easier for eligible customers to access, giving more people the opportunity to benefit from Help to Save and build their savings.

HMRC is continuing to work with the financial sector to develop the new model, including those organisations who have confirmed they will offer Help to Save accounts or are interested in doing so.

HMRC is pleased that Nationwide and Lloyds have confirmed that they will provide Help to Save accounts under the multi-provider model. Many credit unions are also set to offer accounts, following extensive engagement with the sector supported by All Together Money. 

Tom Riley, Nationwide’s Group Director of Retail Products, said:

“Building a savings habit can make a real difference, even if you’re only able to put away a small amount at a time. So, we support the government’s ambition to help more people save and make Help to Save easier to access.

“That’s why Nationwide will be participating in Help to Save and offering a product. As the world’s largest building society, helping all our customers to save and build their financial resilience is at the heart of what we’re here to do.”

Matt Bland, Chief Executive of All Together Money, said:

“We welcome the government’s commitment to credit unions through the expansion of Help to Save. Credit unions have a strong interest in offering these accounts and ensuring the scheme reaches the people and communities it is designed to support, helping more people build a savings habit and strengthen their financial resilience.”

If your organisation is interested in offering Help to Save accounts or getting involved in HMRC’s development work, contact enquiries.savings@hmrc.gov.uk.

Retaining the cash ISA limit from 6 April 2027

As announced at Autumn Budget 2026, the annual cash ISA limit of £20,000 will be retained from 6 April 2027. The reduction of the cash ISA limit and associated anti-circumvention rules announced at Autumn Budget 2025 will not take effect.

The Individual Savings Account (Amendment) (No.2) Regulations 2026 that introduced the new cash ISA limit of £12,000 and anti-circumvention rules effective from 6 April 2027, will be revoked.

The government will work with the industry to explore a new ISA incentive for people investing in a stocks and shares ISA for the first time. The detailed design will be developed with the industry.

First Time Buyer ISA

At Autumn Budget 2025, the government announced that it would consult on a new, simpler first-time buyer ISA. When available, the product will be offered in place of the Lifetime ISA and provide a government bonus when a person uses it to buy a house, removing the need for a withdrawal charge.

The consultation ran from 23 June 2026 to 18 August 2026 and sought views on how the product could provide targeted support for home ownership, while remaining simple for savers to understand. 194 responses were received, including submissions from 36 financial institutions and 158 individuals.

Responses showed broad, although conditional, support for the new product. Respondents emphasised that its success would depend on a clear and stable design, straightforward transfer and withdrawal rules, effective consumer communications and the use of existing ISA infrastructure where possible. The government has considered these views carefully in finalising the product in line with these, notably that:

• the government will introduce a new First Time Buyer ISA from April 2029, ensuring providers have the time to develop the new product ready for launch
• the product will allow annual contributions up to £4,000 and provide a 25% government bonus, in line with the Lifetime ISA
• the cumulative bonus will be capped at £20,000 and be calculated on the final account balance
• individuals will be able to hold only one First Time Buyer ISA at a time
• Help to Buy ISA holders will be able to transfer their full balance into an First Time Buyer ISA outside the annual subscription limit between 6 April 2029 and 1 December 2030
• transfers from Lifetime ISAs will not be permitted, but both a Lifetime ISA and First Time Buyer ISA can be used towards the same purchase
• transfers from other ISAs will be permitted up to £4,000 and transfers out, of any amount, will be permitted
• the £450,000 property price cap will be retained for both the Lifetime ISA, Help to Buy ISA within London (and £250,000 outside) and First Time Buyer ISA

Full details of the summary of consultation responses, the government’s response and full table of design features are available in the First Time Buyer ISA consultation.

The government will now work to put the necessary legislation in place and work with industry on the detailed requirements to offer the product.

ISA compliance

In the June newsletter, we outlined the government’s plans for a new ISA manager compliance regime, including penalties for regulatory breaches and reporting failures and a power for HMRC to suspend ISA managers.

We previously announced that the wider compliance regime would take effect from April 2028, with the suspension power introduced earlier, from April 2027. At Budget 2026, the government confirmed that the suspension power will instead come into force on 6 April 2028, alongside the wider compliance reforms and digital ISA reporting.

The package remains unchanged and will include penalties for regulatory breaches, inaccurate or incomplete reporting and failures to submit required ISA reports and returns. Points-based penalties and appeal rights will apply.

Further information is available in the Individual Savings Accounts (ISAs) compliance package.

Income Tax rates on savings income

From 6 April 2027, the basic, higher and additional rates of Income Tax on savings income will increase by a further 2 percentage points.

From tax year 2027 to 2028, the rates of Income Tax on savings income will be:

• basic rate — 24%
• higher rate — 44%
• additional rate — 49%

The starting rate for savings and the Personal Savings Allowance will stay the same.